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Indonesia to take controlling stake in massive gold, copper mine

The Grasberg mine is a flashpoint in Papua's struggle for independence from Indonesia and has fuelled resentment over how much locals benefit from the region's resources

Indonesia will take a controlling stake in one of the world's biggest gold and copper mines for $3.85 billion, the government said Thursday, as it moves to claw back control of the country's vast natural resources.

State-owned mining firm Inalum will get a 51 percent interest in the Grasberg mine, from just under 10 percent now, Jakarta said.

The agreement requires US-based Freeport-McMoRan to cede its ownership stake, but it will keep operating the huge complex in the jungles of Indonesia's Papua province, officials said.

Anglo-Australian mining giant Rio Tinto is also selling its interest in the mine as part of an agreement that the government said it hopes to finalise before the end of the year.

Freeport and other foreign firms operating in Indonesia have been ordered to comply with new mining ownership rules designed to give the country more control of its plentiful resources.

The announcement comes after more than a year of see-saw negotiations about the future of Freeport's operations in the Southeast Asian nation.

The company and Indonesia's government have sparred over the ownership structure of Grasberg and its social and environmental impact, including how the firm manages mine waste known as tailings.

"Today is a very positive and important step," Freeport chief executive Richard Adkerson told a press briefing held to announce the deal.

"We have worked very diligently over these past months to meet president Widodo's instruction to us to find a win-win solution."

Indonesian president Joko Widodo launched the new divestment rules that pushed Freeport to relinquish control of its Papuan mining operations.

Widodo, who is seeking re-election next year, said earlier Thursday that the agreement came after "very difficult, intense" negotiations.

"This is a leap forward," he told reporters.

The deal means more tax and royalties revenue for the government, he added.

The mine is a frequent flashpoint in Papua's struggle for independence from Indonesia and has fuelled resentment over how much locals benefit from the region's resources.

Papua, on the western half of New Guinea island, has been the scene of a simmering independence insurgency since it was annexed by Jakarta in the late 1960s.

Despite sitting atop some of the world's most abundant natural resources, successive governments have failed to take advantage of its vast riches, with critics blaming badly thought-out and nationalist policies that make the country an uncertain place to invest.

A series of regulatory changes from the government in recent years have caused jitters among miners, with some foreign firms choosing to exit Indonesia rather than deal with such an unpredictable environment.